A Week in Review

Richard AshbyPartner, Gilligan Sheppard

  • Australian Limited Partnerships – FTC’s

    It is hard to believe five years have now passed since the release of the original public rulings dealing with the issue of NZ resident partners (“NZP”) of Australian Limited Partnerships (“ALP’s”), and the ability to claim a foreign tax credit (“FTC”) for income tax or dividend withholding tax (“DWT”) paid by the ALP.

    PUB00297 is focussed solely on ALP’s that are corporate limited partnerships for Australian tax purposes and consequently are treated as companies under Australian tax law. First point to determine therefore, is whether the ALP is also a corporate limited partnership under Australian tax law. In this respect, note that this will not be a limited partnership akin to our own regime, which has a separate legal identity (s.11 LPA08).

    Where the definition is satisfied, PUB00297 contains 5 separate rulings:

  • ALP pays Australian income tax on Australian sourced income – FTC available for NZP
  • ALP makes distribution to NZP and deducts DWT – No FTC for NZP (as distribution itself not taxable income for NZP)
  • Australian Unit Trust makes distribution to ALP upon which Australian income tax paid – FTC available for NZP
  • ALP receives franked dividend – No FTC for NZP in respect of franking credit attached to the dividend
  • ALP is a head company and pays Australian income tax on total consolidated group income – FTC available for NZP but only to extent relates to ALP direct income
    The draft ruling contains examples for each of the 5 scenarios.
    Deadline for comment is 8th November 2017, although considering PUB00297 is essentially a reissue of the initial ruling, I would not expect to see any material changes to the draft position post any public submission process being completed.

    FATCA Guides

    IR has dutifully published an update to various FATCA publications it now has available online:

  • IR1083: Foreign Account Tax Compliance Act (FATCA) — U.S. reportable accounts
  • IR1084: Foreign Account Tax Compliance Act (FATCA) — Application of FATCA to collective investment vehicles
  • IR1086: FATCA status of NZ trusts that are not U.S. persons.

    Happy reading.

    Richard Ashby BBus, CA, CPA PARTNER